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After what we had described as a boring (though profitable) summer in our last commentary, September exhibited the same sluggish, quiet trading environment for the first few days after the Labor Day holiday.

To follow up on last month’s report, entitled “Breakout”, we felt the most appropriate theme, given the extremely tight range this month, was a consolidation of past months’ gains. In August, we observed a market that, for lack of a better term, was boring. The S&P stayed in a tight range all month, never closing more than a percent from July’s closing level. Intraday volatility was nonexistent. In fact, through the end of August, we’ve now had 38 straight days where the market has moved less than 1% on a closing basis.

For the early part of June, it looked like markets were getting their wish for a lack of drama and
surprise. In fact, markets were quite calm and traded in a tight range, not straying too far from
May’s closing levels. Then came the Brexit vote on June 23rd.

There is a well-known trading adage that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets. An investor who uses the "sell in May and go away" strategy sells his or her holdings in May and reenters the market in November. The theory claims that by doing so, the investor avoids the traditionally erratic months between May and November and ends up with better performance than someone who buys and holds throughout the year.

MARKET SUMMARY: Markets Hold Gains, Trade Range-Bound

After spending the majority of 2016 in negative territory, markets began the second quarter slightly above 2015 closing levels. Despite the massive run-up from mid-February lows, bears have found it difficult to gain any traction in the second quarter. In what may perhaps be the most notable event in April, the price of oil rose dramatically to over $40 a barrel. If prices can hold this level, they may very well create the sense of “stabilization” that we have been discussing as of late.

We entered October with both domestic and global markets wobbly, sentiment extremely low, and an abundance of caution by market participants. One month later, (a mere 22 trading days), there is a sense of “what were we so worried about again?” There is a famous quote from Warren Buffett which says, “Be fearful when others are greedy and greedy when others are fearful.” That certainly was the case in October as markets recouped losses for the year in spectacular fashion. Perhaps it wasn’t good news that propelled the markets higher, but the absence of all the bad things that were supposed to occur imminently. As clouds lifted and the worst case scenario didn’t materialize, markets rose steadily throughout the month.

MARKET SUMMARY: Markets Remain Choppy and Range Bound

July began with the most widely watched index, the S&P 500, essentially unchanged for 2015. After a brief rally to begin the month, fears over Greece and a Chinese Stock Market Meltdown quickly emerged. This, in turn, stoked fears of a global slowdown, from which the U.S. certainly would not be immune. After a brief dip lower, markets quickly recovered, bringing us close to the highest levels of 2015. As markets climbed, however, the number of stocks participating in the rally decreased significantly with each passing day. Various sectors, most notably commodities, experienced bouts of heavy selling during the same period. One trader aptly referred to the market as the “haves and have-nots”.